Informal Thoughts: Portfolio moves (August 8, 2007)

I'm going to start a new segment where I casually mention my thoughts regarding making moves in my portfolio(s) without worrying too much about organization.

I'm currently thinking of selling Shanda Interactive (SNDA). While I believe in growth in online gaming in China, I already have The9 Limited (NCTY), which is another Chinese Online Gaming Play. Shanda dropped 7.3% today on a strong up day. I see Shanda up 2.9% in after-hours.

But I'm thinking of rotating into other areas.

Some possibilities:

1. Add more to America Movil (AMX). Emerging Market Telecom has been doing great. I already have an overweight on America Movil and Emerging Market Telecom. Should I continue adding to it?

2. Add more Leucadia (LUK). Leucadia is an excellent company that many people call the mini-Berkshire Hathaway. It has excellent management, and recently jumped 7% on good volume to all-time highs. I've been holding on to this, and this company looks like a very long term holding. I'm not a deep value investor, so I'm giving the reins to the great management of Leucadia. I think this company will do very well.

3. Add more ABB (ABB). This is Swiss Infrastructure play is reasonably valued with respect to growth, near its all time high, and is part of the great Infrastructure Bull Market which is benefitting from great global growth.

4. Buy Finisar (FNSR). This is a speculative $4 stock that had been on a bullish ascending triangle pattern. While it has suffered from possible Nasdaq delisting, this stock may benefit from Cisco's (CSCO) good numbers as Cisco accounted for 22% of Finisar's sales last year. The stock jumped 11.88% today in a strong market and also because of an analyst upgrade. This stock is in the networking/optical networking area.


Running a Screen

In order to find more ideas, I'm also ran a stock screen:

1. Stocks with Forward PE < 20


2. Stocks with 5 year growth rate > 20


3. Stocks over their 200 day moving average

This screen is similar but less restrictive than my Cheap Growth Ready to Breakout Screen.

I saw several oil services stocks like National Oilwell Varco (NOV), but I didn't feel like adding to this because I already had Ensco (ESV), an oil driller.

AMX showed up on the list again, and so did ABB.

Rio Tinto (RTP) showed up on the list, but I already had Freeport McMoran (FCX).

I see Telekomunikasi (TLK), but I already was overweighted in emerging market telecom. I see Vimpel (VIP), a Russian Wireless Telecom company, but do I really want another emerging market telecom?

I see Public Service Enterprise Group (PEG), but I don't feel like getting into the utilities sector (I already have a utility).

I see Cummins (CMI), a company which "engages in the design, manufacture, distribution, and servicing of diesel and natural gas engines, electric power generation systems, and engine-related component products worldwide." That's a possibility.

I see Satyam Computer Services (SAY), which an Indian outsourcing company. But do I want another Indian company? I already have an Indian company. But this may be worth a look.

One company that fascinates me in this list is Harris (HRS). They operate in four segments: "Government Communications Systems, RF Communications, Microwave Communications, and Broadcast Communications." The stock is also near its 52 week highs. This company is less levered to the US Credit Crunch, and its customers include the military and government who need this technology.

There's Gildan Activewear (GIL), which looks to have a great PEG, and BE Aerospace (BEAV), a beneficiary of the boom in aerospace. I also see Transdigm Group (TDG), which I already own and is part of the boom in aerospace.

There are many other companies in the list, but I think I have more than enough choices right now.

Emerging Market Wireless Telecom Boom

The stock prices of wireless handset makers such as Research In Motion (RIMM) and Apple (AAPL) have been soaring. Buying the handset makers would be one way to profit from the Wireless boom, but there are many other overlooked and profitable ways.

Investing in Emerging Market Wireless Telecom Companies is a great way to enjoy the growth.

Emerging market wireless telecom companies are enjoying better growth than Developed Nations. According to the CTIA - The Wireless Association -, the United States as of late 2006 has a 72% wireless penetration rate. Many countries such as Italy, Sweden and the UK already have over 100% wireless penetration (multiple phones per person). It becomes more difficult to grow revenue in these countries.

In Emerging Markets, however, wireless penetration is much less, allowing more opportunities to grow revenue. As an example, in Latin America and South America, wireless penetration is expected to be 60% by 2010.

In Emerging markets, landline phones can be very limited and wireless can be the only way to make calls. Wireless telecommunication is becoming more important worldwide and people in emerging markets such as India are more willing to use the technology including Short Message Service (SMS, or Texting). Mobile phones are easily becoming part of the worldwide culture.

Here are four good ways to profit from the boom in emerging market wireless telecom:

1. America Movil (AMX):

America Movil is the dominant player in the Mexico and the Latin America and South America region. This $107 Billion company has a forward PE of 14.48 and a five year estimated growth rate of 32.1% for a very cheap PEG of 0.45 (less than 1 is very cheap!) According to a research report from Research and Markets, key drivers are low wireless penetration in Latin America, Increasing Demand of Mobile Internet, and Revenue Growth from Mobile Content.

America Movil is also the company that made Carlos Slim Helu the richest man in the world. Jim Cramer has said that we should "start copying the best guy with the best stock ... Carlos Slim."

2. NII Holdings (NIHD):

NIHD is a spinoff from Nextel and serves the Latin America region including countries such as Mexico, Brazil, Argentina, Peru and Chile. This $13.8 Billion company has a forward PE of 22.48, and a five year estimated growth rate of 40% for an inexpensive PEG of 0.56. Together with America Movil, these two companies offer great growth in the Latin American and South American Wireless market.

3. Vimpel Communications (VIP):

Vimpel Communications services Russia and countries in the Commonwealth of Independent States (CIS), countries that were part of the former Soviet Union. This $21 Billion company has a forward PE of 13.40, and a five year estimated growth rate of 24.1% for a low PEG of 0.56. Major competitors include MTS, and MegaFon, but since VIP is an American Depository Receipt (ADR), VIP remains the easiest Russian Wireless Telecom company to invest in from the United States.

Wireless penetration rates in Russia and Ukraine are a little over 100% but wireless penetration is much lower in Kazakhstan (51.7%), Tajikistan (11.9%), Uzbekistan (10.4%), and Armenia (37%).

Vimpel has a 31.7% market share in Russia, 49.5% in Kazakhstan, 3.8% in Ukraine, 8.9% in Tajikistan, 28.2% in Uzbekistan and 38.2% in Armenia.

4. China Mobile (CHL):

China Mobile is now the world's largest mobile operator with its subscriber base exceeding 300 million. This $233 Billion company's five year expected growth rate is 23.85%. With wireless penetration in China at around 30%, there is still a lot of growth.

Julie Pohlig, senior analyst at Vital Wave Consulting, offers interesting insight into Chinese subscribers. Chinese subscribers rely on pre-paid phone cards and pay 80% less than Americans for mobile phone service but their monthly investment per month represents 7% or more of their salary. This says "a lot about the perceived importance of telecommunications in that society," Julie Pohlig points out.


There are many other good emerging market telecom companies out there, but the four companies above represent good wireless telecom companies that cover a good portion of the emerging markets.